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Businesses Government The Almighty Buck United States Apple

Web of Tax Shelters Saved Apple Billions, Inquiry Finds 716

mspohr writes with news that Apple might be in a bit of hot water over its policy of offshoring revenues to favorable tax jurisdictions. Only they take it a step further, from the article: "Apple relied on a 'complex web of offshore entities' and U.S. tax loopholes to avoid paying billions of dollars in U.S. taxes on $44 billion in offshore income over the past four years ... The maker of iPhones and iPads used at least three foreign subsidiaries that it claims are not 'tax resident in any nation' to help it avoid paying billions in 'otherwise taxable offshore income,' the Senate Permanent Subcommittee on Investigations said in a statement yesterday."
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Web of Tax Shelters Saved Apple Billions, Inquiry Finds

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  • by Anonymous Coward on Tuesday May 21, 2013 @07:11AM (#43780143)

    If what they did is legal, so what? I take every tax deduction I can legally find, why shouldn't Apple?

    • by Anonymous Coward on Tuesday May 21, 2013 @07:14AM (#43780163)

      If everything legally permissible is deemed morally acceptable then humanity is doomed.

      • Re: (Score:3, Interesting)

        by khallow ( 566160 )
        Nobody has shown that what Apple has done shouldn't be morally acceptable.
        • Re: (Score:2, Insightful)

          by Anonymous Coward

          I for one applaud Apple on using the all the help provided by the US government in the way of tax loopholes to minimize its tax liabilities.

          If the US government takes issue with any of the legal mechanisms used by Apple they need only change the laws to make them illegal.

        • by Anonymous Coward on Tuesday May 21, 2013 @07:41AM (#43780383)

          Define morally acceptable. I find that companies literally sucking money out of the economy, then letting it sit, thereby starving the economy of capital, thereby adding to high unemployment, lower wages, less benefits, less job security, less public services, etc... is pretty bad for society. But maybe things that are bad for the overall society are still considered morally acceptable. ... But I digress, they're re not breaking any laws... Then again, I'm sure they spent loads of money to lobby to make our current system of laws beneficial to them. They used their huge pocketbook to game the system to make their pocketbook massive!

          • by Bill_the_Engineer ( 772575 ) on Tuesday May 21, 2013 @08:24AM (#43780751)

            Actually Steve Jobs and Eric Schmidt lobbied for a one-time tax holiday so they could repatriate their income earned overseas without losing a large portion of it in taxes. Congress didn't like the idea. Congress is putting on a dog-and-pony show to chastise Apple but doesn't seem to mind giving extremely profitable corporations like Exxon tax subsidies.

            • by Anonymous Coward on Tuesday May 21, 2013 @08:55AM (#43781075)

              Actually Steve Jobs and Eric Schmidt lobbied for a one-time tax holiday so they could repatriate their income earned overseas without losing a large portion of it in taxes. Congress didn't like the idea. Congress is putting on a dog-and-pony show to chastise Apple but doesn't seem to mind giving extremely profitable corporations like Exxon tax subsidies.

              I wish you ass-clowns would quit obsessing over the US on every fucking story that comes along. Try paying attention. Here, I'll help out:

              " In addition, the subcommittee review discovered an unusual tax scheme: Apple’s claim that three key offshore companies are not tax residents of Ireland, where they are incorporated, or of the United States, where Apple executives manage and control the companies. One of those Irish subsidiaries has paid no income taxes to any national tax authority for the past five years."

              This isn't just about using loopholes in a country's tax code. They are claiming that the largest part of their core business isn't under the authority of anybody, anywhere on the planet.

              • by cayenne8 ( 626475 ) on Tuesday May 21, 2013 @09:08AM (#43781249) Homepage Journal

                I wish you ass-clowns would quit obsessing over the US on every fucking story that comes along. Try paying attention. Here, I'll help out:

                Well, slashdot *IS* a US centric website, so, you have to expect a good bit of US centric comments and stories.

              • That is the tax loophole in Ireland's tax code.

                Apple made it famous in the eighties - the double Irish with a Dutch sandwich.

                And it's perfectly legal, which is why lots of companies take advantage of it to minimize their taxes.

            • by ebno-10db ( 1459097 ) on Tuesday May 21, 2013 @10:02AM (#43781905)

              Actually Steve Jobs and Eric Schmidt lobbied for a one-time tax holiday so they could repatriate their income earned overseas without losing a large portion of it in taxes.

              We had a one-time tax holiday like that not too many years ago. What they lobbied for was a second "one-time" tax holiday. The promised US investment from the first one never materialized, so even congress didn't get dupped (or bought) for a second one.

          • by mmcxii ( 1707574 ) on Tuesday May 21, 2013 @08:25AM (#43780763)
            I'm sure they spent loads of money to lobby to make our current system of laws beneficial to them. They used their huge pocketbook to game the system to make their pocketbook massive!

            Just remember, you can't buy what isn't for sale. If companies are able to buy their way into writing legislation that means that there is a deeper problem in play here and attacking each company over each incident is like not seeing the forest for the trees.

            No one will get anywhere by attacking Apple (or Google or MS or IBM or GM or Boeing or Lockheed). If there is a deep rooted problem of this nature in the system then the system needs reformed. Going after those who offend loopholes in that system isn't very advanced. It's not much different than a dog chasing his own tail.
        • by Cenan ( 1892902 ) on Tuesday May 21, 2013 @07:51AM (#43780455)

          Cannot be done, moral is per definition a subjective concept - you can only prove it to yourself, your conclusion is not valid for anyone else. We may arrive at similar conclusions with regard to certain actions, and word them into law, but they remain subjective. Most of us might agree that murder is not acceptable, and thus we write it into law that in order to participate in our society, you cannot murder people.

          What the big corporations are doing, to me at least, is morally questionable. Short story is that they buy services and goods from branches located in places where the income tax is lower than where the actual revenue is generated. This shows a blatant disregard for the fact that, to generate the revenue, they make use of infrastructure, labor and the market that buys their shit - not only a disregard for the services offered to the corporation in order to help it create said revenue, but a decision that paying society back for those services is not necessary.

          Another side of the story are governments who decide that they would like a bit of the cut in aforementioned revenue, and undercut their neighbors corporate tax (hello Ireland, various piece of shit Island states in the Pacific, and so on), thereby creating the tax havens Apple is raking in the dough from. This to me is equally morally questionable.

        • by Joce640k ( 829181 ) on Tuesday May 21, 2013 @07:54AM (#43780479) Homepage

          Nobody has shown that what Apple has done shouldn't be morally acceptable.

          Jobs/Woz grew up in the USA, they were educated there and used the resources/facilities/opportunities of the USA to earn their fortunes. Many of those resources/facilities/opportunities were provided using taxpayer money.

          Not giving back to the young people growing up today is morally acceptable to you?

        • Agreed, Companies are legally and ethically responsible to their shareholders to maximize the bottom line. If any company does not do everything they can to minimize their tax liability "legally" then, not only are they are at a distinct disadvantage to other companies, they are also not taking care of their (owners/shareholders). Even if the shareholders don't have the board of directors ousted, in the long run, they will lose out to competition, and eventually go under, or get bought out by a company wi

        • by whitroth ( 9367 ) <whitroth@5-cent . u s> on Tuesday May 21, 2013 @11:55AM (#43783395) Homepage

          You're an ignorant idiot.

          Fact (check it on the IRS website, irs.gov): in 1972, 24% of the US federal revenue stream was from corporate taxes, and 16.67% from individual income taxes. Right now, it's barely above 10% for corporate taxes, and 44+% for individual income taxes.

          Meaning you, personally, are paying taxes *instead* of Apple. How much of the year are you working to pay those?

                            mark

      • Especially considering it's lawyers making the laws they are poad to make by the very people benefitting from the loopholes.

        Time to make these corporations pay their fair share.

        New law, not paying taxes? No copyright or patent protection for you.

    • by telchine ( 719345 ) on Tuesday May 21, 2013 @07:22AM (#43780203)

      If what they did is legal, so what? I take every tax deduction I can legally find, why shouldn't Apple?

      Because the world is changing and it's no longer socially acceptable to just pay what's legal, it's considered inappropriate to pay less than what people would consider to be a fair amount. If you're paying $1 of tax on $1000 of earnings because you've cleverly nested your business assets overseas in a complex web of tax avoidance schemes, then most people would consider that unfair, even if it is legal.

      Tax avoidance (NB not the same thing as tax evasion) was once considered socially acceptable. Of late there's been a swing the other way and national governments are now putting pressure on organisations to pay their fair share of tax (as opposed to just their legal obligation). Companies that don't conform get "outed" in the media. This bad publicity can cause the companies involved to suffer a punishment of a loss in revenue - the public are less likely to do business with companies they see as not paying their fare share of tax.

      Sort of like an extortion racket, except it's okay because it's the government doing it :p

      • by C0R1D4N ( 970153 )
        I think this would upset me more if our govt was actually being responsible with the massive budget it already has.
      • by Twanfox ( 185252 ) on Tuesday May 21, 2013 @07:33AM (#43780299)

        It isn't just that tax avoidance has lost favor. It's that most people have come to the realization (I think) that big money interests work with legislators, whether obviously or covertly, to see to it such loopholes and 'special perks' exist in the first place. It's like playing poker and stacking the deck in your favor every time. It isn't hard to see how that puts the corporations on the 'wrong side' and how it comes off as unfair in most people's minds.

        If the perception was that big money does not have a hand in the creation of laws and receives the same "bad treatment" everyone else does, then I imagine you'd see tax avoidance come back into favor.

      • Re: (Score:3, Interesting)

        by jbmartin6 ( 1232050 )
        Can you please define what "fair share" means?
        • Re: (Score:2, Insightful)

          by smash ( 1351 )
          Sure. What the law requires them to pay. Which they paid... unless someone has proven otherwise?
      • If the government really gave a shit about "fair share" for taxes, then they'd charge a flat rate percentage for everyone.

        Instead they set up a Byzantine network of policies, tax breaks, and incentives and are shocked, shocked when people and companies actually use them or even modify their behavior to get around them.

        I'm getting pretty sick of our government complaining about how poor it is and how everything would be better if us taxpayers, Apple included, would just give them a "fair share" of our money.

      • Sort of like an extortion racket, except it's okay because it's the government doing it :p

        That's funny, I've always called it "peer pressure". What's the difference?

      • by gtbritishskull ( 1435843 ) on Tuesday May 21, 2013 @07:41AM (#43780379)

        I do not have a problem with them not paying more than they are legally required to, but only to a certain extent. And that extent is when they start pumping money into lobbyists and political donations to KEEP those laws unfairly in their favor. If businesses stay out of politics, then they cannot be blamed when they get advantages from it. But, when they essentially buy our politicians and laws, I have a lot less tolerance for the "I was just following the law" excuse.

        For example, I had a big problem with Mitt Romney's tax rate, but not necessarily because it was low. The rate was so low because there is a preferential tax rate for carried interest [wikipedia.org]. I had a problem with it because he was on owner of Bain Capital and they had spent millions of dollars lobbying Washington to keep "carried interest" at a preferential rate. When you have bought and paid for a law, then you become responsible for whether it is fair or not.

        • by zieroh ( 307208 ) on Tuesday May 21, 2013 @07:59AM (#43780539)

          I do not have a problem with them not paying more than they are legally required to, but only to a certain extent. And that extent is when they start pumping money into lobbyists and political donations to KEEP those laws unfairly in their favor. If businesses stay out of politics, then they cannot be blamed when they get advantages from it. But, when they essentially buy our politicians and laws, I have a lot less tolerance for the "I was just following the law" excuse.

          Apple spends comparatively little on lobbying, even by tech standards. And even if they did lobby extensively (which they don't) perhaps we should be faulting our Congresscritters for maintaining a status quo where corporate money buys influence? Don't you think that maybe the fault lies there?

      • Because the world is changing and it's no longer socially acceptable to just pay what's legal, it's considered inappropriate to pay less than what people would consider to be a fair amount. If you're paying $1 of tax on $1000 of earnings because you've cleverly nested your business assets overseas in a complex web of tax avoidance schemes, then most people would consider that unfair, even if it is legal.

        I'm curious; how do you define "fair", and how would you go about forcing companies to "be fair" when the

        • They are a symptom of the underlying problem; government doesn't know how to make tax law.

          Do you suppose they might be making a fuss about the loopholes so that people get upset enough that they will be allowed to close them? Remember, Grover Norquist [wikipedia.org] opposes closing tax loopholes unless the base rate of taxes is lowered to compensate for the increased revenue and he owns the balls of the entire Republican party [atr.org].

    • by Dunbal ( 464142 ) *
      I do believe that corporations have to be resident somewhere. Even if it's Panama or the Cayman Islands. You cannot claim that your corporation is not resident anywhere in the world.
    • Re: (Score:3, Insightful)

      by beelsebob ( 529313 )

      I actually don't understand what the issue is... It seems to be "wha wha wha, apple leaves the money it makes in other countries in those countries, rather than bringing it into the US"... It seems to me that apple is perfectly entitled to do that.

      It's certainly nothing compared to google's "We don't sell anything in the UK, it's all in Ireland, honest" bullshit.

      • I actually don't understand what the issue is... It seems to be "wha wha wha, apple leaves the money it makes in other countries in those countries, rather than bringing it into the US"... It seems to me that apple is perfectly entitled to do that.

        It's certainly nothing compared to google's "We don't sell anything in the UK, it's all in Ireland, honest" bullshit.

        Apple's subsidiaries, located in Ireland, paid a mere 0.05 per cent in tax on $22bn in revenues.

        You get 5 and insightful...there is nothing worth discussing here.

  • by bmo ( 77928 ) on Tuesday May 21, 2013 @07:11AM (#43780145)

    ...Apple isn't the only one that does this.

    Taxes are for little people. They aren't for the rich or corporations. Taxes are for you and small-business, not for people and corporations that can hire the best people who know the best methods of tax avoidance (legal) and tax evasion (it's only illegal if you get caught).

    --
    BMO

  • Ok, so Apple took advantage of tax loopholes and routed income offshore. The real question is: was it illegal?

    How many other companies do the same thing? Is Apple being targeted just because they're Apple? Did they not make the right p

    When other international companies do the same thing?

    • Darned mobile entry, posted before I was done...

      That fragment should read:

      Did Apple not make the right political donations?

    • by smash ( 1351 ) on Tuesday May 21, 2013 @07:26AM (#43780239) Homepage Journal

      Yes, apple are being targeted. In australia, we have a term for this. It is called "tall poppy syndrome".

      Yes, other companies do it. Any company that does NOT do everything within the law to minimize their tax burden is both not doing the right thing by their shareholders, and handing their competitors a competitive advantage.

      If apple have been avoiding tax like this, and you disagree with it, petition your government to get the loopholes tightened. If it is possible to structure their business to minimize the amount of tax they pay, then why shouldn't they?

      If Tim Cook or whoever wants to donate their own money to charity or pay more tax than they need to that is their decision. However the money apple makes isn't owned by apple. It is owned by the company shareholders - who will pay tax on any dividends or capital gains from sold shares in any case.

  • No tax, no law? (Score:5, Interesting)

    by PhilHibbs ( 4537 ) <snarks@gmail.com> on Tuesday May 21, 2013 @07:25AM (#43780235) Journal

    If these foreign subsidiaries aren't "tax resident in any nation", are they protected by the laws of any nation? It seems odd that a company can exist and be recognized as an entity that can hold property without being incorporated in a recognized nation. Can't we just take their stuff and see who they turn to for the protection of law?

  • Taxes (Score:4, Insightful)

    by shellster_dude ( 1261444 ) on Tuesday May 21, 2013 @07:26AM (#43780243)
    With the recent IRS debacle and large corporations like Apple and Facebook avoiding billions in taxes, it should be obvious to everyone that taxes are not about fairness. They are a weapon to be wielded by government to attack opposition and to grant favors to business cronies who elect them and donate to them. If ever there was an argument for a simple tax system, like a flat tax, this is it.
  • Apple’s side: (Score:5, Informative)

    by Udo Schmitz ( 738216 ) on Tuesday May 21, 2013 @07:32AM (#43780287) Journal

    Why not link to their answer as well?

    http://images.apple.com/pr/pdf/Apple_Testimony_to_PSI.pdf [apple.com]

    “Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands. Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61% of Apple’s revenue last year and two-thirds of its revenue last quarter. These foreign earnings are taxed in the jurisdiction where they are earned (“foreign, post-tax income”).”

    • Re:Apple’s side: (Score:4, Informative)

      by Dunbal ( 464142 ) * on Tuesday May 21, 2013 @07:56AM (#43780509)

      From TFA: " It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere."

      Everything you quoted fails to account for the above, from TFA. If it's true, then Apple is evading tax and breaking the law. Everyone (person or corporation) is resident somewhere.

  • by guidryp ( 702488 ) on Tuesday May 21, 2013 @07:40AM (#43780369)

    All the foreign "loopholes" actually only help Apple avoid paying foreign taxes, those aren't about US taxes at all. These seem more about adding to the political theater of the government going after tax dodgers.

    The entirety of Apples foreign cash horde earned on foreign sales, is subject to US taxation. Not one of those foreign shell games protects those earnings from US taxation. In fact they make the cash horde larger, making it potentially sweeter for US taxation.

    But here is the one "loophole" that really counts. US Taxation doesn't come into effect until Apple repatriates the cash, which there is no requirement that Apple (or any other US corporation) ever actually do.

    This is why US corporations have 1.45 Trillion dollars parked outside the USA.
    http://www.forbes.com/sites/afontevecchia/2013/03/19/u-s-companies-stashing-more-cash-abroad-as-stock-piles-hit-record-1-45t/ [forbes.com]

    • by rsmith-mac ( 639075 ) on Tuesday May 21, 2013 @09:08AM (#43781241)

      The most significant quote of the article: "we expect overseas cash balances will continue to grow unless tax laws encourage U.S. companies to repatriate money".

      The corporate tax rate for what Apple is doing is around 35%; that is, Apple would have to pay 35% of their cash pile in taxes if they repatriated it. Which would be generally reasonable if not for the fact that it was already taxed once in the originating country on the original sale. As a result the 35% tax rate is essentially a kind of 35% tariff on exports and foreign sales. You only need to pay it once if you sell within the US, but you pay it along with a second set of local taxes on anything you sell outside of the US, regardless of whether it was even made here. The ultimate effect is that if every dollar were immediately repatriated, foreign sales would either be immensely less profitable than domestic sales, or American companies would be at a significant competitive disadvantage against foreign companies that aren't getting taxed twice (e.g. Samsung).

      Congress needs to give up on this pipe dream that they can have 35% of the profits made off of all foreign sales. When no one else is double-taxing like this, it makes the American tax system look foolish and antiquated.

  • Outrage! (Score:5, Funny)

    by paiute ( 550198 ) on Tuesday May 21, 2013 @07:46AM (#43780429)
    Congress needs to mount an investigation to find the batch of idiots who wrote these tax laws which allow corporations to do this!
  • by Virtucon ( 127420 ) on Tuesday May 21, 2013 @08:00AM (#43780547)

    What's really missing in the discussion here is that all large multinational corporations use tax avoidance strategies. GE for example has a team of lawyers and accountants just focused on minimizing their tax liabilities globally. http://www.huffingtonpost.com/2013/03/11/general-electric-taxes_n_2852094.html [huffingtonpost.com] . This Tax avoidance problem has been discussed for the past few years especially with deficits running as high as they have been. It's the old "we're not taking in enough revenue, so where can we get more." The administration plays that message up, the spin doctors on the Sunday morning news programs echo it because it keeps the discussion in the public eye. Even the news in the UK about the same avoidance strategies being questioned just echos the same problem. What's missing from the discussion is how much money is being pissed away by bad ideas, red tape and boondoggles like studying the sex life of squirrels. Fraud and waste alone cost us billions in the US each year and for every billion we save, that's a billion that could be put to towards other programs (like offsetting the sequester) or simply put back into the taxpayer's pockets by not taking it in the first place. http://www.businessinsider.com/government-waste-spending-sequestration-sequester-2013-3?op=1 [businessinsider.com]

    So, Apple in this case isn't alone and it's just business. What needs to happen in the US is that the crappy tax code and the IRS need to be changed. We need to get rid of the loopholes that allow companies to shelter billions in profits overseas and allow them to move money from place to place without being taxed. That requires changes to the law and specifically to the tax code, I for one am in favor of abolishing it and going to consumption taxes or a flat tax. Think of it: no April 15th hassles. No audits.. That will put thousands of bureaucrats out of work and H&R block and Quicken to boot! Does that mean a smaller government too? Yes, and that is a good thing.

  • by Mr_Silver ( 213637 ) on Tuesday May 21, 2013 @08:02AM (#43780563)

    Google, Amazon and Apple are like those people who turn up to a "bring a bottle" party with a litre of supermarket own brand cola and then proceed to drink the Wyborowa vodka and Hendricks gin all night. They may upset a lot of people, but they've not technically broken any rules.

    If governments feel that companies (that follow their rules) still manage to pay too little tax - then the onus should be on the government to change them. Anything else they do is just blowing hot air.

  • by macbeth66 ( 204889 ) on Tuesday May 21, 2013 @08:35AM (#43780855)

    It has shown our government where the loopholes are and now they can close them. ( Yeah, right, that might happen! )

    Oh, by the way, Apple, since you don't pay, what is in my opinion, your fair share of US taxes, then I do not feel that the US should use taxpayer money to go after people that steal your IP, patents or trade secrets. And those H1Bs you have? We will be paying very close attention to them.

  • by gnasher719 ( 869701 ) on Tuesday May 21, 2013 @08:38AM (#43780883)
    While the quoted article says "... committee claims...", the summary here is headlined "... committee finds... ". A subtle change that completely changes the meaning.
  • by slapout ( 93640 ) on Tuesday May 21, 2013 @08:39AM (#43780901)

    So if California would lower their tax rate they could get at least a piece of the money instead of none of it.

    • by Xest ( 935314 )

      All that does is reduce the tax revenue from smaller and more responsible companies who can't afford to/don't want to avoid paying the taxes they're expected to pay.

      So sure you may get a $10bn tax windfall from the large companies, but you'll lose $30bn from all the other companies that pay the normal corporation tax rate without a fuss as they're only then expected to pay less.

      Even then you assume companies like Apple, Google, Amazon etc. wont just then find other excuses not to pay that lower amount which

  • by davide marney ( 231845 ) on Tuesday May 21, 2013 @09:32AM (#43781545) Journal
    I am not a tax accountant, nor a tax lawyer, but I did have to read and convert into code a lot of tax law.

    The tax law is written WITH THE ASSUMPTION that taxpayers will include all income, take all credits, use all deductions, and make all payments that the law requires. This is the only working definition of "fairness". When you're talking taxes, fairness has nothing to do with paying back society, it has to do with following the rules as written. Fairness is what happens when the IRS treats all taxpayers the same, and doesn't apply special rules and handling to some but not others. That's what is fair.

    Which is what brings the latest scandal into such sharp focus. It is absolutely unfair for the IRS to target one group of taxpayers for special focus based just on their names. It is absolutely unfair for the IRS to ask these organizations to list the books they read, the content of the prayers they pray, the names and addresses of their major donors, and the content of their blog posts. Those things have nothing to do with following the tax rules fairly.

    If anyone has a beef with Apple paying foreign taxes instead of US taxes, any fault would lie with Congress, either for too-lax laws that permit the tax to be legally avoided, for too-generous tax credits that reward major corporations for "investing" in the US, or for too-stupid economic policies that raise the cost of doing business in the US to astronomical heights, making almost any foreign country a cheaper place in which to do business.

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